A Marketing online feature on the status of e-commerce in Canada and why marketers shouldn’t expect a U.S.-scale Cyber Monday any time soon
The holiday shopping season is reaching fever pitch after kicking off the day after Thanksgiving in the U.S. In the past several years, U.S. retailers have turned “Black Friday” weekend into a commercial stampede–literally, in some cases, but the phenomenon goes beyond brick and mortar commerce. At the other end of the Black Friday weekend is Cyber Monday, when retailers serve up deals online for consumers who prefer to shop without dodging stray elbows.
Canadians have bought in on both the physical and digital manifestations of the retail free-for-all. An Ipsos-Reid survey conducted last month indicated that 30% of Canadian online shoppers planned to do some cross-border shopping during Black Friday weekend, lured by incentives like free shipping. Not wanting to lose out, many Canadian retailers also got into the online offer game during the American holiday weekend.
Yet despite the recent froth and some impressive year-over-year growth, only 39% of Canadians polled in Statistics Canada’s 2009 internet usage survey ordered products or services online that year, with their e-commerce activities generating $15.1 billion. Those numbers were up from 32% and $12.8 billion in 2007, but there remains a massive disparity with the U.S. market. According to the NPD Group only 14% of Canadians said they intended to make an online purchase, compared to 28% of U.S. respondents.
For all their web savvy, Canadian consumers are far more likely to look than buy online. And despite some noble attempts by Canadian e-tailers this holiday season, the gap between Canadian and U.S. e-commerce is not closing any time soon.
The reasons are manifold. For one thing, Canadians still tend to be a little skittish about using their credit cards online, especially those relatively new to the internet. In the Statistics Canada survey, 55% of respondents who’d been online less than five years reported concern about credit card security. A 2010 research report prepared by the Retail Council of Canada (RCC), meanwhile, suggested that Canadians “have less of a catalogue shopping mentality compared to Americans.” There’s also the issue, real or perceived, of product availability.
“What we found from some of our stats and surveys is that Canadians just weren’t finding the breadth of product that they could find in the U.S.,” says Anwar Sumar, divisional vice-president, e-commerce for Sears Canada, which has responded to this problem by increasing the number of products in its “Endless Aisle” online initiative.
Larry McKeown, a senior analyst for Statistics Canada, shares a hypothesis he’s come across in his own e-commerce research that suggests Canadian reluctance to engage in e-commerce has some political roots. He’s read industry literature that points to a correlation between trust in public institutions, the private marketplace and the prevalence of online shopping.
“Americans are less trustworthy of government and Canadians are more trustworthy in government,” says McKeown, citing findings from studies of European countries that parallel the U.S.-Canada divide.
“Those countries that are more collective are more likely to have government online and less likely to have e-commerce. Those that are more private market-oriented have more e-commerce and less e-government.”
Slowly, though, the e-commerce needle is moving. Although major Canadian companies such as Canadian Tire have famously dismantled their online shopping hubs, and retail giant Walmart has yet to set up an e-commerce operation in the country, others have taken a leadership role.
Electronics retailer Future Shop, for example, has lowered its threshold for free shipping on online orders from $39 to $20 for the holiday season. Given that shipping costs can spook shoppers (research from NPD Group indicates that shipping costs are the top reason for abandoning online purchases) this move appears to be a shrewd one. Likewise, The Gap, which introduced its Canadian e-commerce operation this summer, offers free shipping and free returns on orders of $50 or more.
Several retailers have also begun to link social media efforts to e-commerce. Future Shop test-drove a group-buying promotion in mid November, offering five products at a deep discount. Each deal was “unlocked” when a minimum of 50 people indicated their interest.
“It was the first attempt for us at a group or social commerce-type buying page,” says Elliott Chun, communications manager at Future Shop, of the initiative the company dubbed Tech Spree. “It was about telling your friends, telling your family members about this hot deal, and if enough people commit to it, it’s activated.”
Roots, meanwhile, has used Facebook to bring online offers to consumers. In addition to a 20% discount on Black Friday, the retailer’s Facebook fans received an additional 5% off of purchases.
With innovations such as group buying and social media outreach, Canada has a road map to more robust e-commerce. There are also reasons for optimism in the Statistics Canada results, which suggest that the more people use the web in general, the more comfortable they are spending money with it. Younger Canadians who’ve grown up online are diving right in, with 51% of respondents 16 to 34 making an online purchase in 2009.
“I don’t think I’m going out on a limb when I say that, as they enter their income-earning years, they’re likely to continue to expand their use of the internet, particularly when you see e-commerce incorporated into social networking,” says McKeown.
When they’re ready to buy, more retailers will be ready for them. According to the RCC report, 65% of mid-to-large-sized Canadian retailers had an e-commerce site, and “most” retailers expect to have one in the next five years. As more Canadian retailers go online and adopt internationally proven ways to drive e-sales, and as the country’s wired generation enters the workforce, the spending and uptake gap with the U.S. will close. All that’s required is the rarest of things during the holiday shopping season: patience.
